18.11.2019 – Daily Report. Blow-off on Wall Street – hesitation and procrastination in Frankfurt. While the important US indices took off on Friday, the DAX does not dare to leave cover at the beginning of the week. Investors finally want to see a signed agreement between China and the USA.
DAX with handbrake on
Once again the same game on the Frankfurt Stock Exchange: the shareholders ignored the requirements from the USA and remain covered. The DAX remained unchanged at 13,246 points. Some brokers referred to the double high of 13,301 and 13,308 points, which the German benchmark index was better advised to crack convincingly. If this succeeds, the DAX should move to its all-time high of 13,597 points at the beginning of 2018. The scepticism about the still outstanding final partial deal between China and the USA remained high.
Not enough in the trade dispute
On the positive side at the moment, both sides continue to talk to each other – which does not suggest a trade war. The state-run Chinese news agency Xinhua reported that China’s Deputy Prime Minister Liu He, US Finance Minister Steven Mnuchin and US Trade Representative Robert Lighthizer had been on the phone with each other on Saturday. Apparently, however, Beijing first had to accept a request – the phone call was probably made at the request of the Americans.
Asian stock markets attract
Nevertheless, the Chinese stock market took action. The Chinese CSI-300 rose by 0.8 percent to 3,908 points. In addition, a surprising, albeit moderate, interest rate cut by the Chinese National Bank created a good mood. For the first time since October 2015, the People’s Bank of China lowered the reverse repo rate from 2.55 to 2.5 percent. It also pumped over 180 billion yuan or 26 billion dollars into the system. The Hang Seng also climbed 1.4 percent to 26,681 points because a court rejected the current ban on masquerading as unconstitutional. Meanwhile, police have stormed Hong Kong Polytechnic University. In Tokyo, the Nikkei 225 closed about 0.5 percent higher at 23,417 points.
Beijing sells dollar and buys gold
Meanwhile, CNBC referred to an interesting development in China with reference to ANZ Research. Beijing continues to reduce its dependence on the dollar and decoupling will accelerate. Exact holdings are not known, but analysts suspect that China held around 59 percent of its reserves in dollars in June. However, the shopping list is expected to include more sterling, yen and euros in the future. Meanwhile, official gold reserves rose to a record 1,957 tonnes in October.
Dow over 28,000
Wall Street didn’t care – the bull market continued on Friday. Dow Jones Industrial, S&P 500 and Nasdaq Composite all ended the weekend on record highs. Specifically, the Dow Jones gained 0.8 percent to 28,004 points. The Nasdaq Composite rose by 0.7 percent to 8,540 points. And the market-wide S&P 500 gained 0.8 percent to 3,120 points. The statements made by economic advisor Larry Kudlow on Thursday evening, after which the trade talks entered the final phase, were a source of delight – we had reported on this here.
The oil dams are breaking
Meanwhile, Oilprice.com, the industry’s service, was sceptical about the oil bulls before the OPEC+ meeting next month in Vienna. The current production cuts expire in March 2020, but are likely to be extended. Important: The global supply could continue to increase rapidly in 2020 and exceed the increase in consumption. According to new figures from the International Energy Agency (IEA), the non-OPEC offer could increase by an astonishing 2.3 million barrels per day; most estimates are currently at plus 1.2 million barrels per day (mb/d). Not only is the US shale responsible, but also an expected increase in production in Brazil, Norway and Guyana. WTI recently remained unchanged at 57.73 dollars, Brent stagnated at 63.32 dollars.
This is what the day brings
The diary doesn’t bring any really heavyweight events, you’ll find the overview here as always: Market Mover
The Bernstein Bank wishes you successful trades!
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